Included in the portfolio of emergency relief offered under the Senate’s $2 trillion coronavirus aid package is a direct loan program designed to provide financial assistance to mid-sized businesses suffering from the economic impacts associated with the COVID-19 pandemic.

As part of the broader mandate to the Department of the Treasury in connection with the relief programs created under the CARES Act, Title IV of the Act authorizes the Treasury to allocate $454 billion to make loans and other investments in programs created by the Federal Reserve to support lending to eligible US businesses.  The Federal Reserve has not yet announced the details of the loan programs and/or credit facilities it will create to facilitate this lending, however the CARES Act does provide the framework for the creation of a direct loan program targeted specifically at eligible businesses and nonprofit organizations with between 500 and 10,000 employees (“mid-sized businesses” under the Act). 

The Act requires that, in addition to meeting certain prescribed eligibility criteria, applicants for direct loans under the mid-sized business program certify, inter alia, that they will not “outsource or offshore jobs for the term of the loan and 2 years after completing repayment of the loan.”[1]  The Act provides no additional specificity around the obligations created as a function of this restriction on outsourcing and offshoring, making it difficult to evaluate the practical impact this restriction may have on mid-sized businesses that receive loans under the program.  

As we continue to track updated guidance in this space to provide a more fulsome analysis of the potential business impacts of this restriction, we are considering initial questions we expect may arise for loan applicants as a result of these ambiguities, including: 

  • Is the restriction on outsourcing/offshoring only forward looking or will it apply to jobs that are currently  outsourced pursuant to active outsourcing agreements?
  • To the extent businesses are currently outsourcing jobs, will these businesses be required to insource these jobs in order to receiving loans under this program?
  • Under this restriction, will companies be permitted to hire offshore contract manufacturers or will these procurement activities be prohibited pursuant to the company’s loan certification?
  • Are cloud services considered outsourcing?
  • If a company’s current outsourcing agreement allows the company to terminate and insource the in-scope jobs in the event a government regulation prohibits outsourcing, would this provision of the CARES Act trigger such a clause?

The CARES Act requires the Treasury Secretary to publish application procedures and requirements as soon as possible, but no later than 10 days after enactment (i.e., by April 6, 2020) and the Treasury and Federal Reserve are expected to issue further guidance over the coming weeks to provide clarity around implementation of the CARES Act economic relief programs. 

[1] CARES Act, § 4003(c)(3)(D)(i)(VIII).


Peter George practices international commercial law and regularly advises clients, both on the buyer and provider side, on domestic and multi-jurisdictional sourcing transactions, complex business process transactions involving human resources, finance and accounting and other web enabled services.


Amy focuses her practice on regulatory and transactional issues in information technology and outsourcing, including cross-border data transfers, data security, global privacy, website privacy policies, behavioral advertising, and outsourcing for both domestic and multijurisdictional transactions. She is an associate in the Chicago office.